China Beige Book International CEO Leland Miller joins Yahoo Finance Live to discuss the U.S. no longer delisting some major Chinese companies.
- An about-face from the New York Stock Exchange, the exchange reversing its decision to delist three of China's largest telecommunications companies. And we've seen shares of all three of those companies surge on the news after that came out yesterday, China Mobile among them. The initial move to delist those companies came in response to an executive order President Trump signed banning Americans from investing in companies that the US says does business with the Chinese military.
Let's bring in Leland Miller. He's the CEO of China Beige Book International. And Leland, this is an interesting reversal largely because the New York Stock Exchange was very adamant about moving forward with these plans. What do you think prompted it, and how far does that go in dialing down the temperature as it relates to US-China relations?
LELAND MILLER: Well, I don't think it dials down the temperature much. I think what happened here is that the outgoing administration is-- I think you could say they're focused on other things right now. They didn't want to-- they're apparently not ready to hold anyone's feet to the fire on pushing this through. The Biden administration is coming in. They don't want any part of this. See, this is just-- it's just complications.
So I think the question is, who is going to push this forward when you had a situation in which nobody really wanted this to happen outside of some hawks in the White House? So the New York Stock Exchange certainly didn't want to do this on its own. The question is, you know, was there enough clarity? There wasn't enough clarity. So I think what you're seeing right now is simply policy adrift in the last days of administration, and you're actually seeing a lot of that.
- I mean, we've talked a lot about some of these changes that might not be there once we get to the new administration. Some of the pressure on ByteDance, the owner of TikTok there might be one other thing to consider in the China vein. But considering this announcement came out New Year's Eve, to already backtrack on it, a lot of people were caught off guard by it. I mean, what does that signal to you, just kind of having, you know, four days go by before a complete reversal?
LELAND MILLER: Well, I mean, this may shock some people. We've been dealing with this for years. I mean, you see very, very sharp, strong words against China. You see policies pushed or half pushed, and then attention spans get lost. The president changes his mind or another priority comes up, and then you sort of jump to another subject, and things don't get done the way they're supposed to.
So I think this is just sort of par for the course. And it's been a lot worse in the last six months because the administration has been adrift from a policy perspective. So I'm not seeing anything different here than we've seen for a couple years now. And again, you know, the Biden administration has no interest in grabbing this and running with it. They have their focus domestically. So you know, this is the name of the game right now.
- Another company we're watching very closely, Alibaba, of course-- a lot of speculation about where exactly Jack Ma is. The context to all of this is, of course, he was seen criticizing Chinese financial regulators back in October. That led to the halting of the Ant Group IPO. And we haven't seen the founder of Alibaba in several months now.
What do you make of all the speculation around this, Leland? Is this about the Chinese government publicly sending a message about who's actually in charge? Are there real concerns within the regulators about the scale, and scope, and influence of somebody like a Jack Ma in the country?
LELAND MILLER: Yeah, all the above. So you know, obviously Jack spoke out against the government in recent weeks, and that bit him. I mean, there's no question part of the trouble has started around the poor way that they dealt with Alipay and the potential IPO. But I mean, what I think is missed as we talk about how Jack has incited regulators in the past few weeks has been this idea of where Alibaba stands in the Chinese financial ecosystem.
What Alipay is-- sorry, what Alibaba has been doing through Alipay, through Ant Financial, through Yue Bao, which is an online mutual fund, has been essentially evolving the Chinese system outside of state banks. And state bankers have not liked this. And if you look back at what happened in 2014 or so, you had rates being paid online of, say, 7% or so through Alibaba's platform. If you went to a state bank, they were capped at 3%.
So you have had years of hostilities from state bankers who have looked at this and say, we're playing by the game, and Jack Ma is not playing by any game. And so he's unfairly drawing deposits. You had enormous deposit flight out of state banks over the course of the past several years as a result of this. And it only sort of tempered when Beijing stepped in and added a new regulation or forced rates down our line. So you've been seeing hostilities and tension for years and years, and this is what a lot of this is. There has been long-standing tension between state bankers and Alibaba, and some of that's playing out right now.
- Isn't the flip side to that, though, is that the regulators allowed that to happen? I mean, if you look at the Ant Group, for example, which Jack Ma, of course, has a stake in, they have been lending to small and medium-sized businesses that have been overlooked by the state banks. The Chinese government has known about it. Regulators have seen the growth there. Isn't this, in many ways, a problem that regulators allowed, if they wanted to call it a problem. This growth has happened under their watch, right?
LELAND MILLER: Oh, absolutely. I mean, they've taken the good. They've taken the bad. And for years there was very few opportunities, very few mechanisms to get credit to small and medium-sized enterprises.
I mean, if you look at what happened with shadow banking in China, shadow banking popped up not as this Ponzi scheme, not as these instruments of Ponzi schemes, which, of course, there's plenty of that. It is a way to get capital to firms that were underserved by the traditional banking system. And the government has always had a very rocky relationship with shadow banking because it needs shadow banking, but it also was scared of shadow banking and its excesses.
The same type of thing happens when you look specifically at Alibaba or some of the Alibaba affiliates and platforms. They needed Alibaba. They dealt with the bad for a long time. And then at some point the systemic worries, the anger against Jack Ma personally, all of this sort of combined into-- into a problem with Alibaba. And that's what you're seeing right now.
- Yeah, for people more used to kind of what happens here in the US watching this play out, they might say, oh, the fear that Jack Ma is actually in trouble might be overblown. Just a reminder too that we saw, you know, a former chief of a big Chinese state lender sentenced to death today over bribery charges. He was convicted on there too. So I mean, it's a different world to consider.
But a lot to watch there. We'll continue to track. Appreciate you coming on here-- Leland Miller, China Beige Book International CEO. Thanks again.